The Strategic Types and the Aims of Economic Adjustment

Abstract

When the classical theorists investigated the question of how price formation found its own level, how national income was distributed, etc., they nearly always based themselves on the presupposition that free competition existed. This presupposition involves a number of elements, but the one which has the greatest bearing on the shape that the theory will assume, is the presupposition that none of the economic individuals operating in the market, in production, etc., plays such an important role that they are capable on their own of exercising a marked influence on the market situation. On the basis of this presupposition, it was natural that a theory was developed where, in practically every sphere, it was taken for granted that every individual acts as though the general features of the market situation, especially prices, is given, and cannot be influenced by him. Thus, the only course then left to the individual, was to adjust himself to the various given situations; the consumers, for example, adjusted their consumption, and producers adjusted their production to given prices, etc. The only exception was to be found in the very opposite extreme, viz. a single producer who exercised a monopoly.